Q.Read the following statements carefully: Statement 1: Money is a commodity which is generally accepted as a medium of exchange. Statement 2: Money solved the problem of double coincidence of wants. In the light of the given statements, choose the correct alternative from the following: (A) Statement 1 is true and statement 2 is false. (B) Statement 1 is false and statement 2 is true. (C) Both statements 1 and 2 are true. (D) Both statements 1 and 2 are false.

Let’s start with something you’ve done a hundred times: swapping your lunch with a friend. You give them your packet of chips, they give you their chocolate. No money changes hands. That’s barter — the direct exchange of goods for goods.

Now imagine you want to buy a new phone, but the shopkeeper doesn’t want your old bicycle. You’d have to find someone who wants that bicycle and also has something the shopkeeper wants. That’s the core problem: barter only works when each person wants exactly what the other has — a double coincidence of wants.

What is the Barter System?

The barter system is the oldest form of trade — goods and services are exchanged directly for other goods and services, without using money. NCERT (Class 12 Macroeconomics, Chapter 3) introduces it as the starting point before explaining why money was invented.

The Four Major Drawbacks (as per NCERT)

1. Lack of Double Coincidence of Wants

This is the biggest hurdle. For a trade to happen, you must have what the other person wants, and they must have what you want. If you have rice and want shoes, you need to find a shoemaker who wants rice. If the shoemaker wants cloth instead, you’re stuck.

2. Absence of a Common Measure of Value

How many kilograms of wheat is a pair of shoes worth? There’s no standard unit. Every trade requires a separate negotiation of relative value. This makes comparing prices across different goods extremely difficult. You can’t say “this is cheaper than that” without a common yardstick.

3. Indivisibility of Goods

Some goods cannot be split without losing value. Suppose you want to buy a cow, but you only have a sack of grain worth half a cow. You can’t give half a cow to the seller — the cow is indivisible. You’d have to find someone who wants exactly your grain and has something worth exactly that, which is rare.

4. Difficulty in Storing Value

Perishable goods (milk, vegetables, meat) cannot be stored for long. If you produce more than you need today, you can’t easily save that surplus for future trade. Even durable goods like grain can rot or be eaten by pests. There’s no reliable way to hold purchasing power over time.

Why These Drawbacks Matter …